A landmark continuation fund deal in India is the latest example of secondaries firms forging ahead in what some believe is Asia-Pacific’s most promising market.
ChrysCapital, one of India’s largest private equity firms, said Tuesday it had closed a roughly $700 million continuation fund led by HarbourVest Partners and LGT Capital Partners, according to a statement. Pantheon also backed the deal.
The deal, which is understood to have been 2x oversubscribed, could be the largest GP-led transaction to come out of the subcontinent.
The continuation fund will house Mumbai-headquartered ChrysCapital’s stake in the National Stock Exchange of India, which the manager acquired in 2016 with its $510 million ChrysCapital VI fund.
“The troubles of China are benefitting India for sure,” said a senior market source with knowledge of the transaction. “This deal is a really great way to play, to a degree, the macro growth story of India [via] one of the leading stock exchanges.”
UBS advised on the transaction.
With many investors rethinking their China exposure, India may be well positioned to benefit from the resulting outflows, including providing sponsor-initiated opportunities. Indian private equity funds are expected to benefit from geopolitical and macroeconomic tailwinds amid an overall fundraising drop in Asia-Pacific. The country has also been singled out by global private equity firms as a promising growth market.
“India has been, interestingly, our third-biggest country for deploying equity capital” after the US and the UK, Blackstone president and chief operating officer Jonathan Gray said at PEI Group’s NEXUS event in March. “Many people have found [India] a hard country to operate in.” He described the country’s revenue growth as “phenomenal”.
ChrysCapital itself holds the record for the second-largest Indian PE fund with its 2021-vintage ChrysCapital IX, which closed above target on $1.4 billion in 2022, according to data from affiliate Private Equity International. This month Mumbai-headquartered Kedaara Capital was reported to have closed India’s largest-ever private equity fund, amassing around $1.7 billion.
The Asia-Pacific region still accounts for a fraction of the total global market, with just 4 percent of total secondaries deal volume last year, according to data from Evercore.
India approach
According to local market sources, secondaries buyers have traditionally encountered three main types of situations in India: crisis-era GPs who raised a fund and who were not able to raise another; those who were able to raise a second and not a third; and teams investing in India from global funds looking for a partial or total withdrawal.
The first two sets of circumstances can provide opportunities for GP-led processes as these managers are often under pressure to generate returns for their LPs and show that they still have a proposition worth investing in.
India’s macroeconomic picture is a positive one. The country’s stock market surpassed the Hong Kong Stock Exchange by total value of shares in January to become the fourth-largest globally. Exit value in India is also a bright spot in the region: the country was one of only two markets in Asia that had meaningful increases in exit value last year, climbing 12 percent to $25 billion, according to Bain & Company’s Asia-Pacific Private Equity Report 2024.
Some dedicated secondaries firms have opened offices on the subcontinent. TPG NewQuest opened an office in Mumbai in 2017 and brought on Bain & Co’s Sachin Khandelwal as director and head of portfolio management of the outpost. In 2018, Hong Kong-headquartered secondaries firm TR Capital also opened in Mumbai and hired an ex-Temasek exec to lead the bureau. The firm added a second Indian office last year with its New Delhi outpost.
Recent GP-led deals to come out of India include Samara Capital’s continuation fund for three India-headquartered businesses. UBS, which is led by global secondaries head Philip Tsai, also advised on that transaction. TR Capital, Axiom Asia Private Capital, StepStone Group and Unigestion backed that deal.
“There was a period when no one would touch India,” the senior market source added. “People got burned and [said] ‘never again’. The alignment of problems in China, strong growth story in India, knowing how to model the FX and knowing that there are high quality assets there that have really proven themselves have opened the market in a major way.”
– Katrina Lau contributed to this report.
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